First thing first, DON’T get carried away by news channels and media because everyone is selling their own story. Do calculations by yourself before coming to any conclusion using this income tax calculator.
NO DATA IS BEING COLLECTED HERE – EVERYTHING HAPPENS IN YOUR SYSTEM
I have made this simple but powerful calculator to understand your tax liability in the old and new regime for the full financial year 2020-21. You are most welcome to use it 🙂
You can also download the following Google sheets or make a copy to calculate the difference.
Assuming you claim 80C deductions of Rs.1.5 lakh(except HRA deduction), the new regime is definitely BETTER for gross salary above Rs. 12.3 lakh
HRA deduction makes and breaks the benefits provided in the new tax regime with monthly rent as small as Rs. 15,000/- for gross salary below 20 lakh
All in all there are 70 exemptions which would go away but I have mentioned few important ones here:
– PPF, ULIP, ELSS, Home Loan Principal, NPS, PF (Sec 80C)
– House Rent Allowance(HRA) Exemption (Sec 10)
– House Loan Interest (Sec 24)
– Leave Travel Allowance Exemption (Sec 10)
– Medical Insurance Premium and Preventive Health Checkup (Sec 80D)
– Standard Deduction of Rs. 50,000/-
– Long Term Fixed Deposits (Sec 80C)
– Education Loan Interest (Sec 80E)
– Donations (Sec 80G)
– Savings Bank Interest (Sec 80TTA)
– Entertainment Allowance and Professional Tax (Sec 16)
Exemptions which would stay are:
– Employer’s contribution to NPS (Sec 80CCD(2))
– Income from life insurance
– Deductions Under House Property(Rental Income)
Things to note
– If the individual or the HUF has no business income, he/she can change between any regime very year
– In other cases, the option once exercised for a previous year shall be valid for that previous year and all subsequent years
– If the net income is less than Rs 5,00,000/-, then tax liability is Rs 0/- and can be claimed as rebate under 87A
– The employer’s contribution exceeding Rs 7.5 lakh in a financial year to retirement funds such as EPF, NPS is proposed to be made taxable in the hands of the employee
– Sec 80EEA – 1.5 lakh additional deduction the housing loans extended for another year(FY2020-21) which is over and above Rs 2 lakh(Sec 24). It holds for first time buyers where property value is less than Rs 45 lakh
In the figure below, we draw a comparison between difference in tax in old and new regime by varying salary from 3 lakh to 50 lakh rupees. We have assumed that Person lives in Bangalore and pays a monthly rent of Rs 15,000/- and utilizes Sec 80C completely.
We can clearly see that new regime is better after gross salary crosses 27 lakh mark.
But if the Person doesn’t claim HRA, new regime is better after gross salary crosses 12.3 lakh mark.
New against Old Income Tax
Disclaimer: This income tax calculator is for Salaried individuals of Age < 60 years
Github Link for playing with the calculator is – Github
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